— The video game rumor mill is abuzz with reports that Sony is working on a new version of its handheld PlayStation Portable game machine — a gadget that will have touch controls on the back.

With the Gamescom video game trade show taking place in Germany this week, Eurogamer has reported that they spoke to three separate development sources who have seen and used the new PSP. These sources say the machine is about the size of the PSP-3000 and that it has a rich and detailed screen, but that the most interesting feature is the way games are controlled — by a touch-sensitive area on the back of the device behind the screen.

Though Sony did not reveal a new handheld game machine at Gamescom, according to Eurogamer's sources, the company has been showcasing an unfinished version of the gadget to publishers using several first-party games. Sony has also reportedly settled on its business model for the device and may be launching it by the end of 2011, the sources said.

But what does Sony have to say about all of this? When I contacted Patrick Seybold, senior director of corporate communications for Sony, he said, "We don't comment on rumors or speculation."

Indeed, rumors of a new PSP have been making their way around the gaming world for months. If the rumors are to be believed, this new gadget might have a touch screen and tilt controls like an iPhone; it might have two cameras; and it might even come in the form of a phone. Hell, it might have the ability to transport people through space and time. No wait, I made that last part up.

Still, Michael Pachter, games analyst for Wedbush Morgan Securities, said he is certain that Sony is working on a new iteration of the PSP.

"I think that rumors of a new design are legitimate," he said in an interview Friday. Though he added, "It's hard to say if Sony will put touch controls on the back. My personal view is that back controls are awkward and less natural than front controls where you can see what you’re doing."

Sony has certainly struggled recently in the handheld arena. Not only has Nintendo's DS dominated the portable game hardware market, Nintendo recently announced a highly anticipated DS successor — the Nintendo 3DS. It won't bend space and time, but it will play 3-D games without the need for 3-D glasses.

Sony launched a redesigned PSP — the PSPgo — last October, but sales of the pricey, digital-only device have been sluggish.

Pachter said that it's difficult to know when Sony will reveal or launch a new portable game machine. With the company having no portable gadget news to announce at either E3 or Gamescom, he said they could be waiting to reveal it at the Tokyo Game Show Sept. 16 to 19.

"The PSPGo was a pretty big disaster for them, and I think that they will be a lot more cautious with any new model," Pachter said. "If they get the device right, they should launch now. If it’s just a minor improvement over the current device which is not selling well, what’s the point?"

Ultimately, Pachter says Sony has found itself in the uncomfortable position of playing catch-up.

"They should make a decision about where they want to be on the handheld consumer electronics side," he said. "They owned the portable music player market 25 years ago, and lost their dominance to Apple. They owned the home console market 15 years ago, and let Nintendo and Apple encroach in portable gaming.

"The PSP was a great device, but never captured the consumer sweet spot — children and young, hip 20-somethings — that bought the DS and iPod," Pachter said.

In fact, Sony has made it clear it's now going directly after that younger market. It recently launched a new ad campaign — one that features a new kid spokesman named Marcus Rivers. In an advertisement revealed earlier this week Marcus (and Sony) poke fun at the iPhone competition.

After a dorky iPhone user shows off a game on his device, Rivers says of the competition: "That ain't built for big-boy games. That's built for texting your grandma and calling your girl."

That's right, while some seem to suspect the current-gen PSP is losing steam and perhaps headed out the door, Sony continues to insist it's alive and kicking, and to tout it as the only machine capable of playing console-quality games. And Seybold insists Sony and other publishers will continue throwing their support behind the current-generation PSP this fall and holiday season.

He says 70 games will have been launched for the machine by the end of the year and points to some of the big launches on the horizon — Ubisoft's "Ghost Recon Predator" and Sony's own "Patapon 3," "God of War: Ghost of Sparta" and "EyePet" among them. Meanwhile, Sony is reintroducing to a younger PSP demographic content they've previously published by offering some of their "Greatest Hits" for $9.99.

And Seybold said the company is on track to sell 8 million PSPs and PSPgos this fiscal year.

"We're seeing a lot more movement on PSP," he insists. "The most robust and richest game experiences are only available on PSP."

Yes. Yes. But let's just say Sony is, in fact, working on a super-secret PSP. What features would you like to see in the new device?